List Firms Unscathed in Dot-Com Downturn

Though traditional list management and brokerage firms enjoyed their share of dot-com venture capital last year, they say that the decline in that windfall has not hurt their businesses overall and that their interactive divisions are still viable.

"We started out about a year and a half ago very heavily involved with interactive companies in both management and brokerage, and I'd be in denial if I said that a year and a half later, we're seeing the same or increased volume from them," said Andy B. Ostroy, chairman/CEO of ALC of New York LLC, which started its NetMail interactive division in November 1999.

By the end of 1999, most traditional list firms were dealing with at least some Internet-based clients, and several had started divisions or even separate companies to handle the interactive side of their list businesses. Incidentally, those divisions sprouted right around the time that the word "profit" entered the dot-com consciousness and vernacular.

As part of the dot-com drive toward profitability, traditional list firms received new business from dot-coms looking for guidance in the ways of traditional direct marketing. List firms were more than happy to oblige.

"Dot-coms originally came in like gangbusters, and everyone was trying to get as much of their business as they could," said John F. Papalia, president of Statlistics Inc., Danbury, CT.

The dot-coms represented an opportunity for list companies, allowing them to branch out while conducting business as usual with their traditional direct marketing clients.

"There was an infusion of capital into the direct marketing environment -- both in traditional mail campaigns and e-mail campaigns -- from a source that didn't exist before, which was the dot-com mailer," Jay Schwedelson, corporate vice president at Worldata/Webconnect, Boca Raton, FL.

Now that the dot-com money has all but disappeared, Schwedelson said, the traditional list firms are still going strong because they never relied on it. However, there has been some speculation as to the fate of interactive divisions within traditional list firms.

"I know a lot of list companies went out there and started a whole new division -- some even started a whole new company -- and I think those are going to end up being merged back into the original company," Papalia said.

Even so, this doesn't mean that Papalia is against working in the interactive space. As long as list firms address the market, he said, they don't necessarily need a separate division to do so. Statlistics handles its interactive business within its traditional brokerage and management divisions.

Still, those traditional list firms that have interactive marketing divisions have not given up on them.

While volume from dot-coms has slowed considerably, traditional mailers are just beginning to make use of list firms' interactive services.

"The catalog and publishing companies are behind the interactive curve. But with paper and postage prices rising, they are looking for some additional ways to get incremental customers, so having an interactive division is still a good place to be," said Frank Quaranta, director of media services at Millard InterActive, the Internet arm of Millard Group Inc., Peterborough, NH.

It is widely agreed upon in the traditional direct marketing community that the Internet is just another marketing channel and, eventually, will be treated as such by all.

"I think the industry is finding itself," said Geoff Boytos, CEO of directmedia.com, a wholly owned subsidiary of Direct Media Inc., Greenwich, CT. "In time, the interactive side of lists will mirror traditional lists."

Also, those Internet marketers that have survived thus far are still inclined to seek direct marketing assistance.

"A lot of the silly money that came from exuberant funding is obviously gone, so you have a combination of companies that are no longer in business but also companies that are in business that are trying to be smarter and take a more grounded direct marketing approach," Boytos said.

In the end, as long as list companies are well versed in the fundamentals of direct marketing, as well as multichannel marketing, they will probably fare well.

"Multichannel marketing is the way to go," Ostroy said. "We're still on a growth curve in the interactive space that will continue to play itself out in the coming months and years."